by David Jackson, USA TODAY

by David Jackson, USA TODAY

WASHINGTON -- President Obama nominated North Carolina congressman Mel Watt on Wednesday to head the government agency that oversees the government-backed mortgage giants Fannie Mae and Freddie Mac, prompting criticism from Republicans opposed to allowing some principal reductions for struggling homeowners.

"Mel understands as well as anybody what caused the housing crisis," Obama said in nominating Watt to be head of the Federal Housing Finance Agency. "He knows what it's going to take to help responsible homeowners fully recover."

If confirmed by the Senate, Watt would replace acting FHFA Director Edward DeMarco, who has been criticized by Democratic lawmakers and housing advocates for opposing plans for partial forgiveness of mortgage debt.

Republicans have signaled opposition to Watt's nomination, saying proposals to reduce principals are likely to lead to more mortgage defaults and cost taxpayers money.

Sen. Bob Corker, R-Tenn., a member of the Senate banking committee, said, "I could not be more disappointed in this nomination. This gives new meaning to the adage that the fox is guarding the hen house. The debate around his nomination will illuminate for all Americans why Fannie and Freddie failed so miserably."

Sen. Elizabeth Warren, D-Mass., called on the Obama administration to remove DeMarco as acting director of FHFA, saying it "has refused repeatedly - often with cold indifference - to work with families struggling to save their homes."

Warren also said that Watt "is a thoughtful policymaker with a deep background in finance and a long record as a champion for working families."

In March, attorneys general from nine states, led by Democrats Eric Schneiderman of New York and Martha Coakley of Massachusetts, sent Obama a letter saying that under DeMarco's tenure, Fannie and Freddie have been a "direct impediment to our economic recovery."

Obama made the Watt announcement at the same time he nominated venture capitalist Tom Wheeler to chair the Federal Communications Commission.

Watt has represented the Charlotte area in the U.S. House for 20 years. Obama pointed out that Watt is a senior member of the House Financial Services Committee, which handles housing policy.

"Mel has led efforts to rein in unscrupulous mortgage lenders," Obama said. "He's helped protect consumers from the kind of reckless risk-taking that led to the financial crisis in the first place. And he's fought to give more Americans in low-income neighborhoods access to affordable housing."

Rep. Jeb Hensarling, R-Tex., who chairs the House Financial Services Committee, said the issue isn't Watt, but what he called the Obama administration's refusal to reform the housing finance system.

Hensarling said DeMarco, the acting director, "has emphasized protecting the interests of taxpayers and reforming Fannie and Freddie," and that "whoever sits in the FHFA director's chair needs to continue DeMarco's policies. If they simply do whatever the administration wants, they will have failed."

Fannie Mae and Freddie Mac are government sponsored mortgage-finance enterprises that the government rescued at the height of the financial crisis in September 2008 as they neared collapse from losses on soured mortgage loans.

Taxpayers have spent about $170 billion to rescue the companies. So far, they have repaid a combined $55.2 billion.

Fannie and Freddie together own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans. Those loans are worth more than $5 trillion. Along with other federal agencies, they back roughly 90% of new mortgages.

The White House has been lining up supporters who might hold some sway with GOP senators as they consider Watt's nomination.

Erskine Bowles, a fellow North Carolinian and former White House chief of staff under President Clinton, praised Watt as a first-rate selection, telling the Associated Press that he brings "a bright mind, great work habits and an understanding of how Washington works to the job."